March 6, 2024

Copy Trading with AI

This is the third article in a four-blog series about trading strategies that you can leverage with the Scopechat AI-powered crypto trading assistant.

For the first and second parts, read the following articles: Signal Trading with AI and Trend Trading with AI.

In crypto, copy trading is a strategy where people buy or sell digital assets based on the activities of successful and/or popular investors, such as venture capital (VC) firms, top-performing traders, and more.

Unlike signal trading, which focuses on a token's technical indicators and other statistics, or trend trading, which relies on a token's price movement and momentum, copy trading is more focused on using the latest moves by seasoned traders, in the hopes of replicating their gains.

In this article, we will discuss how you can execute copy trading with the help of crypto + AI technology. We will also understand the advantages, risks, and important factors to look into for copy trading.

Pros and Cons of Copy Trading

Copy trading works for both short- and long-term traders, although their methods may differ a bit:

- Copy trading for short-term traders, including day traders and swing traders, usually involves following individual traders that have consistently outperformed their fellow investors. This usually involves trades worth $5,000 or less.

- Meanwhile, copy trading for long-term traders such as blue-chip investors and fundamental traders would involve tracking larger investments that VCs and other institutions have entered into.

The advantage of copy trading lies in replicating the investment portfolios of experienced investors, not only saving time on market research but also reducing information gaps. However, as with any trading strategy, there are some risks involved with copy trading, such as:

- Copy trading doesn't assure success. The past performance of tokens and fellow investors doesn't predict future outcomes.

- Copy trading requires promptness. Traders need to be able to spot and mimic alpha-generating moves quickly. Tools and features such as Scopechat's Watchlist and Alerts can help with this.

- Smart Money holdings may include meme coins, posing potential risks. DYOR before purchasing.

AI-Powered Copy Trading: Dashboards to Watch

Your awareness of the advantages and drawbacks of using copy trading will inform your decisions by the time you start looking for crypto tokens to trade. Searching for the next hot tokens is usually time-consuming, but thanks to AI advancements, there are Web3 solutions like the Scopechat crypto trading assistant, which can streamline this process for traders.

Under Scopechat's Copy Trading strategy dashboard, there are two recommended lists to check for your next crypto discovery:

1. Smart Money Holding

Tailor-made for short-term copy traders, this leaderboard displays the current portfolio holdings of the top 100 Smart Money addresses.

Smart Money refers to individual addresses that have demonstrated outstanding performance in the past month, considering metrics such as profit amount, ROI, and win rate. Observing which tokens are popular for Smart Money addresses can be beneficial for your short-term strategy.

2. VC's Top Position Changes

This leaderboard displays the portfolio changes of VC firms in the past 7 days, detailing the tokens accumulated or divested by these VCs during this period.

Long-term copy traders can leverage this dashboard by taking note of which tokens are being favored at the moment by VCs, based on how many VCs have increased their investments and how much their stakes have grown recently.

AI-Powered Copy Trading: Filters to Use

To further refine your alpha hunting quest as a copy trader, the dashboards on Scopechat feature various filters that you can use to zero in on the types of tokens that you prefer.

We recommend the use of the following filters for short-term traders who are viewing the Smart Money Holding leaderboard.

1. Market Cap

Because Smart Money often invests in high-risk low-cap tokens, you can set a lower limit for the market cap that tokens need to reach to filter out medium to large-cap tokens with relatively stable fluctuations.

2. Holders

The number of holders can reflect the popularity of a token. If the number of holders is small, it indicates that the token is not widely known yet, and it is still in the early stages, where price fluctuations may be intense. Therefore, you can choose an appropriate range for the number of holders.

Meanwhile, for long-term traders viewing the VC's Top Position Changes dashboards, the following filters are recommended.

1. Narrative

Add category filtering (e.g. AI) to help you find out which AI tokens are also held by institutions. Filtering by narrative helps you discover the categories within the Web3 industry that VCs are bullish on.

2. 24H Perpetual Volume

Since tokens held by institutions usually have a relatively large market cap, the price fluctuations are typically not very drastic. You can identify trading opportunities by setting the contract trading volume. Tokens with a significant increase in contract trading volume often indicate market attention, and you can select a contract trading volume range to find such tokens.

Watchlist and Alerts: Advanced Portfolio Tracking

Aside from dashboards, leaderboards, and filters, Scopechat also has a game-changing Watchlist and Alerts feature that lets you monitor your favorite crypto tokens & their market actions.

As mentioned earlier, copy trading relies on timeliness in terms of spotting the latest market moves by seasoned traders. Copy traders engaging in several tokens will benefit greatly from an alerts system that lets you know the latest moves as they happen.

Scopechat provides many signals you can base your trades on, such as:

  • Price Change
  • Centralized Exchange Data (Deposit & Withdraw)
  • VC/Whale Position Changes
  • Smart Money Buy/Sell
  • Volume Change - Spot/Perpetual
  • Funding Rate/Open Interest Data

You can also set up and receive real-time alerts on these tokens, straight to your Discord or Telegram.

(Note: The Watchlist and Alerts feature is exclusive to Scopechat Pro users. Subscribe to Scopechat Pro to gain access to this feature.)

For more information about copy trading and other trading strategies made easier by Scopechat, check out the Scopechat Trading Dashboards guide.

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